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INCOME TAXES
 12 Months Ended
Dec. 31, 2014
Notes to Financial Statements  
Note 4 - INCOME TAXES

The reconciliation of income tax expense computed at the U.S. federal statutory rate to the income tax provision for the years ended December 31, 2014 and 2013 is as follows:

 

Income before income taxes   $ 7,041,874     $ 286,685  
Taxes under statutory US tax rates     2,394,237       86,307  
Increase (decrease) in taxes resulting from:                
Increase (decrease) in valuation allowance     (8,509 )     12,562  
Foreign tax rate differential     (1,392,850 )     (138,550 )
Permanent differences     2,026       -  
State taxes     2,279       -  
Income tax expense   $ (997,183 )   $ (39,681 )

 

The increase in the Company’s effective tax rate in the current year was primarily attributable to an increase in revenue in Cyprus which maintains a corporate income tax rate of 12.5%. The net decrease in the valuation allowance was caused by the reversal of certain financial reporting accruals that were not previously deducted for tax.

 

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and amounts used for income tax purposes. Significant components of the Company’s deferred tax assets and liabilities consist of the following:

 

US    12/31/2014     12/31/2013  
Net operating loss carry forward   $ 201,457     $ 198,123  
Accrued salaries and other liabilities     -       87,654  

 

Cyprus           
Net operating loss carry forward     11,439       2,518  
Total deferred tax asset     212,896       288,295  
Valuation allowance     (212,896 )     (288,295 )
Deferred tax asset, net   $ -     $ -  

 

At December 31, 2014, the Company had US net operating loss carryforwards of approximately $515,000 that may be offset against future taxable income, subject to limitation under IRC Section 382, which begin to expire in 2031. At December 31, 2014, the Company had Cyprus net operating loss forwards of approximately $91,000 that may be offset against future taxable income which begin to expire in 2019 as they were entirely generated by SkyPharm during 2014. Prior to 2013, net operating losses generated in Cyprus were carried forward indefinitely. No tax benefit has been reported in the December 31, 2014 or 2013 consolidated financial statements due to the uncertainty surrounding the realizability of the benefit, based on a more likely than not criteria and in consideration of available positive and negative evidence.

 

The Company asserts that it will indefinitely reinvest the unremitted earnings and profits generated by Amplerissimo, their Cyprus subsidiary, in 2014 which is evidenced by the funds deposited for the pending acquisition of B2IN (see note 9). Accordingly, no US deferred tax liability has been established for the unremitted earnings and profits generated in Cyprus.

 

The Company applied the “more-likely-than-not” recognition threshold to all tax positions taken or expected to be taken in a tax return, which resulted in no unrecognized tax benefits as of December 31, 2014 and December 31, 2013, respectively.

 

The Company has elected to classify interest and penalties that would accrue according to the provisions of relevant tax law as interest and other expense, respectively. As of December 31 2014 the Company has accrued approximately $64,000 in other expense.

 

The Company’s tax years since inception through 2014 remain open to examination by most taxing authorities.

 

Taxes payable are $1,091,377 and $38,286 as of December 31, 2014 and December 31, 2013, respectively.